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El Tipo de Cambio Real de Costa Rica
[Real Exchange Rate of Costa Rica]

Author

Listed:
  • Leon, Jorge
  • Mendez, Eduardo
  • Prado, Eduardo

Abstract

This paper estimates Costa Rica’s Equilibrium Real Exchange Rate (ERER) using quarterly data from 1991 to 2003. Cointegration and Unit Root tests are used to determine if the Purchasing Power Parity (PPP) applies. The results show that PPP does not stand. The ERER is an unobservable variable; therefore it is approximate by two methods developed in the literature: BEER (Behavioral Equilibrium Exchange Rate) which explains the deviations from PPP as a result of changes in the fundamentals; and FEER (Fundamental Equilibrium Exchange Rate) that estimates the long run equilibrium path of the real exchange rate under a partial equilibrium structural model. Both methods show a real appreciation in the 90s until 2001 and a real undervaluation of the colón for 2003.

Suggested Citation

  • Leon, Jorge & Mendez, Eduardo & Prado, Eduardo, 2003. "El Tipo de Cambio Real de Costa Rica [Real Exchange Rate of Costa Rica]," MPRA Paper 44509, University Library of Munich, Germany, revised 2003.
    • Handle: RePEc:pra:mprapa:44509
    as

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    File URL: https://mpra.ub.uni-muenchen.de/44509/1/MPRA_paper_44509.pdf
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    References listed on IDEAS

    as
    1. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
    2. Rebecca L Driver & Peter F Westaway, 2005. "Concepts of equilibrium exchange rates," Bank of England working papers 248, Bank of England.
    3. Ferreyra, Jesús & Herrada, Rafael, 2003. "Tipo de cambio real y sus fundamentos: Estimación del desalineamiento," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 10.
    4. repec:exe:wpaper:00/02 is not listed on IDEAS
    5. Mr. Claudio A Paiva, 2001. "Competitiveness and the Equilibrium Exchange Rate in Costa Rica," IMF Working Papers 2001/023, International Monetary Fund.
    6. Barisone, Giacomo & Driver, Rebecca L. & Wren-Lewis, Simon, 2006. "Are our FEERs justified?," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 741-759, August.
    7. Mr. Ronald MacDonald & Mr. Luca A Ricci, 2001. "PPP and the Balassa Samuelson Effect: The Role of the Distribution Sector," IMF Working Papers 2001/038, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange Rate; Real Exchange Rate; BEER; FEER;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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